One of New Zealand's most expensive homes is at the centre of a million dollar dispute over a construction botch-up.

The developers of a luxury $40 million home in Northland are locked in a legal battle over who should pay to replace more than $1m worth of windows that were reportedly spoiled by a job which was meant to protect them.

The completion date for Russian billionaire Alexander Abramov's luxury hideaway at Helena Bay could be delayed as insurers are refusing to foot the bill. The Helena Bay property is described as New Zealand's most expensive new residential development. Four houses, comprising a main luxury residence and three guest villas, have been built on 10,000sq m of prime coastal land, 40km north of Whangarei. The main u-shaped four-bedroom lodge has a central courtyard swimming pool and a 50m hall that can be turned into a ballroom.

A small army of contractors, including carpenters, electricians, heating and ducting specialists, plasterers and painters have been working on the project.

Problems began with joinery protection efforts. Sub-contractor Temporary Protective Solutions was hired to apply the protective coating to the windows and a specialist tape to joinery in late 2012, designed to protect expensive and delicate materials during construction.

The Tesa coating - specially chosen for the harsh, coastal setting - was supposed to be removed within weeks. But instead it was left on for around nine months.

When the tape was peeled off, it left indelible marks on the joinery. TPS directors argued the marking left on the joinery was barely noticeable.

However the head contractor, Northland Coastal Developments, ordered all damaged fittings to be replaced.

The head contractor took legal action and won a $1.5m adjudication against TPS. TPS attempted to recover the money from its insurers NZI, but they are understood to have declined the claim on the grounds that it was a product failure.

Unable to pay the bill, TPS last week filed for voluntary liquidation, and the head developers may now be faced with taking legal action against the insurers to recover the money.

Northland Coastal Developments director Chris Seel said he could not comment on the legal process.

"There's nothing I can say. This is in the hands of lawyers and it's quite a big issue for all parties involved."

Seel wasn't sure if the legal action would delay the project, which was due to be completed in a few months.

The directors for TPS declined to comment and NZI did not return calls.

Abramov is one of Russia's richest men. According to richlister bible Forbes, the 55-year-old father of three is worth $4.55 billion. He owns a steel company with Chelsea Football Club owner Roman Abramovich.

Abramov was granted permission to build a 233m coastal walkway around the bay to a pontoon off a jetty of about 13m at one end of the beach.

Abramov reportedly owns the superyacht Triple Seven, a sleek and modern 67m boat with a cinema, gym and jacuzzi, which has visited Auckland twice.

One of the conditions for the $15.9m land purchase was Abramov would create a 2ha wetlands area.